Landlording is Not All That Passive
Investor · Houston, TX · Member since 2022 · 126 posts · 122 votes
Landlording is Not All That Passive
Most Popular Reply
Travis TimmonsPro Member
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votesI had gap in between tenants at a long distance mid term rental a few months ago. A buddy of mine and I went and spent the weekend at the property. He was talking about wanting to get into real estate...his exact words were, "I just want some passive income." In the exact moment he was saying that, I was snaking the shower drain. Agreed...not passive. It can get more hands off over time though.
66 Replies
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes2y
Quote from @Terra Padgett:
The biggest advantage I found to RE investing is control. Control the acquisition, reposition, operation, leversge and disposition,
Lose control? No way. Investing as a club into a fund is lack of control squared, bloated with fees. No say, no liquidity, no way.
I'd rather invest in a public REIT. At least that would offer liquidity and cost efficiency.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
It's rarely passive.
An investor should pay attention to their P&L to avoid errors (no one is perfect), question high and unordinary expenses, and discuss possible solutions to challenges.
On average, should only take 1-4 hours/month if less than 4 properties.
Logical Property Management4.9454 Reviews - Investor · Golden, CO · Member since 2022 · 10 posts · 12 votes2y
Some years it is passive, some years it is a soul sucking grind, even with PM in place. I was lucky to have the perfect tenant in place for seven-years, coupled with minimal maintenance over that stretch. Then came the next five-years with added properties, not so reliable tenants, and natural disasters, and a few tenant caused disasters. I've learned that it is a blessing when you have a long stretch with no issues, and that this too shall pass when problems arise.
Communication with your PM and staying on top of maintenance will save you a lot of headaches and keep your investments more passive.
- Investor · Houston, TX · Member since 2022 · 126 posts · 122 votes2y
Quote from @Steve Vaughan:
Quote from @Terra Padgett:
The biggest advantage I found to RE investing is control. Control the acquisition, reposition, operation, leversge and disposition,
Lose control? No way. Investing as a club into a fund is lack of control squared, bloated with fees. No say, no liquidity, no way.
I'd rather invest in a public REIT. At least that would offer liquidity and cost efficiency.
If that's your jig, then have at it. If you want to be an Operator & work work work with All the control, then be my guest. That just becomes your day job (and nights and weekends too...lol) But if you're trying to earn Passive returns in real estate, especially with assets that have higher potential ROIs, then handing over control to those with experience in the field is just wiser IMO. The intent is not to invest with any and every "GP" on the block, but so is not renting a SFH to any tenant that applies. Yes, your funds are illiquid for a time, but real estate is the long game anyways. A public REIT tracks waaaay too closely with the stock market and provides very minimal diversification from the market.
Thanks for your thoughts
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Terra Padgett:
Quote from @Steve Vaughan:
Quote from @Terra Padgett:
The biggest advantage I found to RE investing is control. Control the acquisition, reposition, operation, leversge and disposition,
Lose control? No way. Investing as a club into a fund is lack of control squared, bloated with fees. No say, no liquidity, no way.
I'd rather invest in a public REIT. At least that would offer liquidity and cost efficiency.
If that's your jig, then have at it. If you want to be an Operator & work work work with All the control, then be my guest. That just becomes your day job (and nights and weekends too...lol) But if you're trying to earn Passive returns in real estate, especially with assets that have higher potential ROIs, then handing over control to those with experience in the field is just wiser IMO. The intent is not to invest with any and every "GP" on the block, but so is not renting a SFH to any tenant that applies. Yes, your funds are illiquid for a time, but real estate is the long game anyways. A public REIT tracks waaaay too closely with the stock market and provides very minimal diversification from the market.
Thanks for your thoughts
Both of you is actually very correct. Terra like to invest into private syndication through SPV, but biggest cons is layered commision as Steve said. Btw REIT is not related to stock market but related to bonds, but it's actually good because the NAV is being priced real time so bottom can be seen. If we invest in SPV that's holding 10 syndication but 3 is stopping capital call, it actually the same as REIT that's crashing hahahaha but well yea the feeling is different.
In reality,CRE SPV and REIT are not much different except there's more public accountability in REIT, which I like better than syndicator that always hides the problem LOL - Houston, TX · Member since 2015 · 261 posts · 170 votes2y
There is nothing passive about being a landlord. Nothing.. Sometimes I think about selling my properties and putting those funds into REIT like realty income (O) and collect a monthly dividen.
- Rental Property Investor · New Braunfels, TX · Member since 2022 · 409 posts · 408 votes2yOk, it's not "truly" passive. I got 19 text messages in 2023 for 17 rental properties within 15 miles of our house. I had to drive to 3 of them to meet the tree guys but the other 16 were "call the plumber" or "call the AC guy" and one "call the electrician". We saved $28,000 in PM fees by doing this and I spent less than 2 days total managing it all, plus a day this week to prepare the paperwork for the CPA. If it was "truly" passive I wouldn't have gotten a single text and I wouldn't have had to prepare for the CPA. Would I rather trust my money with a fund that promises me 8% maybe, no way......
Quote from @Terra Padgett:
You always hear about rental properties as passive income. Well I totally disagree. Even with PM in place, there are still many active activities when it comes to direct property ownership. Yes, it does take several tasks off your plate, but it is NOT “truly” passive. When it comes to your rentals, do you agree or disagree?
- Investor · Houston, TX · Member since 2022 · 126 posts · 122 votes2y
Quote from @Gustavo Delgado:
There is nothing passive about being a landlord. Nothing.. Sometimes I think about selling my properties and putting those funds into REIT like realty income (O) and collect a monthly dividen.
Yep! There are A LOT of ways to invest your money into real estate without being a direct owner of rental properties. You discover which investment best fits your desires and run with it. We've divested several properties and re-deployed that capital into private equity placements and promissory notes via our REI club, Power Pool Fund. It's by far been a much more pleasant experience than Landlording. The properties we still have give me angst every month. lol...
- Investor · Houston, TX · Member since 2022 · 126 posts · 122 votes2y
Quote from @Account Closed:
Ok, it's not "truly" passive. I got 19 text messages in 2023 for 17 rental properties within 15 miles of our house. I had to drive to 3 of them to meet the tree guys but the other 16 were "call the plumber" or "call the AC guy" and one "call the electrician". We saved $28,000 in PM fees by doing this and I spent less than 2 days total managing it all, plus a day this week to prepare the paperwork for the CPA. If it was "truly" passive I wouldn't have gotten a single text and I wouldn't have had to prepare for the CPA. Would I rather trust my money with a fund that promises me 8% maybe, no way......Quote from @Terra Padgett:
You always hear about rental properties as passive income. Well I totally disagree. Even with PM in place, there are still many active activities when it comes to direct property ownership. Yes, it does take several tasks off your plate, but it is NOT “truly” passive. When it comes to your rentals, do you agree or disagree?
Thanks for sharing your experiences. If you're only seeing or looking at 8% returns from someone's fund, then we need to connect to open your pool of opportunities. lol. Personally, I've found the $250-$400 (or whatever) per month in rental property cash flow not enough for the task at hand. You're just creating another job for yourself. Of course every market and deal may vary, so I'm just throwing out some average numbers, but the juice isn't worth the squeeze for so-called passive income. And don't let an eviction, vacancy, property damage, capex or anything of the sort hit; cash flow wiped out for the year and then some possibly.
- Member since 2019 · 7k+ posts · 4k+ votes2yDRN bro
Quote from @Gustavo Delgado:
There is nothing passive about being a landlord. Nothing.. Sometimes I think about selling my properties and putting those funds into REIT like realty income (O) and collect a monthly dividen.
- 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
@Terra Padgett
I disagree.
I self manage, and it is mostly passive.
You need systems and policies in place.
Rent is automated.
Problems get texted to me and I forward them to my handyman or HVAC guy.
So I might spend 30 minutes a week on 30 plus properties
That is pretty passive.
- Real Estate Agent · Beverly, MA · Member since 2019 · 358 posts · 308 votes2y
Absolutely agree!! It drives me nuts that people push real estate as so passive. It’s not. Maybe you’re not spending 40 hours a week managing your portfolio, but my stocks require less work from me than the duplexes. Still so worth it though.
- Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes2y
So it seems the word "passive" has some subjectivity to it...
If the stock market is the benchmark for passive - put money in and let it grow - then RE investing is FAR from passive
I mean just going from the top - you have (1) finding deals, (2) analyzing deals (3) getting lending (4) inspecting and coming up with a scope for the rehab (5) meeting contractors and overseeing work (6) managing or putting a PM in place.
Cool now it's rehabbed and rented. This is where it gets more passive - you you either have a property manager which requires minimal decision making on repairs/turnover/tenant acceptance etc. Or you self manage which requires systems in place, accepting payments, maintenance calls etc.
Ono top of that a lot of us will do some DIY along the journey - generally to save money for one reason or another.
I personally like a little hands-on - idk it's a little challenging and fun as long as it doesn't get too overwhelming. There is also no one who cares about your properties more than you - so I think a little extra time spent now can save lots of time down the road.
- 2yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Terra Padgett I try to buy “better” properties or do renovations up front upon purchase to minimize repairs after the initial month or two of work.
It means that most months I spend less than 1/2 an hour on tenant issues and usually don’t have repairs. But it’s still not passive. I still have to deal with depositing rent for a couple of hours at the beginning of the month which I’m happy to do since this is the best time of the month!
I also spend a few hours each month visiting my properties to make sure they’re in tip top shape and don’t need any trash picked up or maintenance. I do a lot of great thinking and listen to great podcasts during this time when I drive around to the properties. It’s still not quite passive, but almost.
- 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Just reads off as a way to promote a syndication, which is arguably the worst investment to get into as of 01/06/2024.
Being a physical asset or physical structure owner, in any capacity, is never passive. Owning your own house, your own car, your own jet, own boat, or anything physically is going to require some pain. That's just the cost of it. In real estate's case, you get that incredible upside and volatility and that's what makes it worth it. Syndications do not really give you that, promissory notes keep you capped with a little bit of upside, and with all of these nothing is guaranteed.
You don't sign up doing this knowing it's different unless you read BP pre-2023.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @V.G Jason:
Just reads off as a way to promote a syndication, which is arguably the worst investment to get into as of 01/06/2024.
Being a physical asset or physical structure owner, in any capacity, is never passive. Owning your own house, your own car, your own jet, own boat, or anything physically is going to require some pain. That's just the cost of it. In real estate's case, you get that incredible upside and volatility and that's what makes it worth it. Syndications do not really give you that, promissory notes keep you capped with a little bit of upside, and with all of these nothing is guaranteed.
You don't sign up doing this knowing it's different unless you read BP pre-2023.
There're few folks here that implicitly promoting syndication/SPV/investment group or club and such LOL , sometimes one or two folks that implicitly promoting syndication/SPV or everything in between , they need to ethically put explicit disclaimer such as "I am receiving commission and compensation from syndication business as I'm the co-promotor/co-syndication of such and such"...just like when someone promoting Ohio real estate heavily we know they're Ohio realtors so it's ethically understandable LOL
- 2yDaniel TanasaBusiness MemberRealtor · Houston, TX · Member since 2019 · 351 posts · 174 votes
Hey Terra,
I perfectly agree. The only passive investment is if you invest in someone else's deal as a LP. Even tho is not a lot of work, there is some managing you need to do even when you use a property management company. But unlike the fully passive investments, real estate has so many more advantages that is making it all worth it. At least in my opinion.
- Member since 2019 · 7k+ posts · 4k+ votes2y
in reality LP investment is nothing passive once you lost your $50,000 LOL due to the lousy GP failing to secure fixed-debt or the fund manager of debt asset reveals they invested millions into San Francisco office and valuation went down by 50%.
Nothing passive bro LOL in fact it's one of the most nastiest business per-se. - 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Daniel Tanasa:
Hey Terra,
I perfectly agree. The only passive investment is if you invest in someone else's deal as a LP. Even tho is not a lot of work, there is some managing you need to do even when you use a property management company. But unlike the fully passive investments, real estate has so many more advantages that is making it all worth it. At least in my opinion.
Don't confuse passive as more restrictions to being active.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
Ok, it's not "truly" passive. I got 19 text messages in 2023 for 17 rental properties within 15 miles of our house. I had to drive to 3 of them to meet the tree guys but the other 16 were "call the plumber" or "call the AC guy" and one "call the electrician". We saved $28,000 in PM fees by doing this and I spent less than 2 days total managing it all, plus a day this week to prepare the paperwork for the CPA. If it was "truly" passive I wouldn't have gotten a single text and I wouldn't have had to prepare for the CPA. Would I rather trust my money with a fund that promises me 8% maybe, no way......Quote from @Terra Padgett:
You always hear about rental properties as passive income. Well I totally disagree. Even with PM in place, there are still many active activities when it comes to direct property ownership. Yes, it does take several tasks off your plate, but it is NOT “truly” passive. When it comes to your rentals, do you agree or disagree?
I suspect your results are directly related to the quality of your rental properties.. There is a huge difference in how passive or non passive your going to be based on location quality of asset and quality of tenant. Bottom line.. For instance I had over 300 section 8 doors at one time I burnt out in less than 3 years and sold out to the partners. And wished them luck.. on the other end of that we have a Commerical rental with a young up and coming doctor and a double net lease. this is passive I only have to check to make sure we got our rent on time and forward the tax bill to her and the insurance bill.. I am responsible for the roof ( when the time comes and a few other items but we get almost 1000 a month extra for cap ex in the rent).. So to me thats pretty passive. C class rentals with blue collar workers and or section 8 NO way no how is passive in any stretch based on my long experience of owning them and funding those who buy them. They can work fine you as the owner MUST engage though U cant buy these type of assets and just sit back and think someone else is going to manage the whole mary ann for you. Syndication of course can be passive and we are in a few .. But like you see all over BP right now many are leaking oil badly and small investors in funds or syndication's that are not working are literally helpless to fix their situation. So NO control at all. - 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
what type of assets are the 10% that you kept?
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes2yI sold by owner my 2 apt buildings to 2 out of area syndicators on i/o contracts.
Quote from @Nicholas L.:
what type of assets are the 10% that you kept?
What I had left was only 2 duplexes and 2 houses.
Selling one of those per calendar year for tax purposes. - Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes2y
I invest in the stock market, direct owned real estate, and in syndications. The stock market is passive and the other two are not. It's not difficult for a patient smart investor to purchase a property that would never lose money over the long term. That's basic criteria for many of us and there are ways to ensure this outcome (buying right, adding value, location, prudent debt, reserves). That is not the case with all syndications; so, it requires a lot of work qualifying sponsors and opportunities...years of work. I invest my hard earned savings in all of these vehicles and believe strongly in them but they require work and I enjoy that work.
- Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes2y
Quote from @Terra Padgett:
You always hear about rental properties as passive income. Well I totally disagree. Even with PM in place, there are still many active activities when it comes to direct property ownership. Yes, it does take several tasks off your plate, but it is NOT “truly” passive. When it comes to your rentals, do you agree or disagree?
Well, I live on the beach in FL, do all my biz in the Cleveland markets. Maybe I get 1 call a week. I own dozens, PM is worth every penny.
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